Prime minister Theresa May’s unexpected announcement that the government is scrapping the cap on how much councils can borrow to build new homes has been widely welcomed

Speaking at the Conservative Party conference in Birmingham , May said she was lifting the limit on what local authorities could spend on residential schemes and would allow them to use revenues from existing social housing to invest in new stock.

It is a move that has long been called for by councils and could, many hope, kickstart a new wave of social housing projects.

She told the conference: ‘There’s a government cap on how much [local authorities] can borrow against their Housing Revenue Account assets to fund new developments.

‘Solving the housing crisis is the biggest domestic policy challenge of our generation. It doesn’t make sense to stop councils from playing their part in solving it.

‘So today I can announce that we are scrapping that cap. We will help you get on the housing ladder and we will build the homes this country needs.’

There is however still no known timescale for when the cap will be removed.

Brian Berry, chief executive, Federation of Master Builders has commented, ‘This is the most exciting, and potentially transformative, announcement on council housing for many years. It is something the house-building sector and local authorities have been crying out for since the last economic downturn as a means by which to increase house building. Indeed, the only times the UK has built sufficient numbers of homes overall is when we’ve had a thriving council house building programme.

Local authorities have a strong interest in delivering new affordable homes and many would have the appetite to directly fund this, but have been frustrated from doing so by an artificial cap on their ability to borrow against their assets to build homes. In a victory for common sense, May has now signalled that the borrowing cap will be scrapped to allow councils to build many more new homes.’